The UAE-India Comprehensive Partnership Agreement (CEPA) arrived with great fanfare in the middle of February, promising to create a new era of opportunity and prosperity in both nations — and push bilateral trade beyond $100 billion within five years. On May 1, it went into effect, promising to bestow clear benefits to UAE exporters in a range of industry sectors. But how exactly can they take advantage?
One of the people in the room throughout the five months of negotiations was Juma Al Kait, assistant undersecretary of Foreign Trade Affairs at the Ministry Of Economy, and he offers his insight into what UAE companies need to do now. Below are the excerpts of the interview:
Firstly, can you outline why this deal with India is such an important one for the UAE?
The UAE-India CEPA was the first, and perhaps most significant, piece of a new foreign trade agenda that was announced as part of the Projects of the 50, the initiative that sought reengineer our economy for the next 50 years. As we emerge from the global pandemic, strengthening and deepening our relationships with strategically important partners such as India became a key component of this agenda. Our CEPA policy is geared around accelerating the free flow of goods, rebuilding supply chains, increasing trade volumes to and from the UAE, enhancing our status as a facilitator of global trade, and opening up new investment and joint-venture opportunities.
Our principal goal is to double the size of economy from Dh1.4 trillion to Dh3 trillion by 2030. The UAE-India CEPA achieves this by substantially removing or reducing tariffs, improving market access to the world’s sixth-largest economy, making companies in each country eligible for government procurement, and creating a platform for SMEs to collaborate and expand internationally.
Now that the CEPA has come into effect, can you explain more about the tariff reduction and which sectors and products are eligible?
The agreement is a comprehensive one, covering 18 chapters in total. In terms of trade in goods, the deal offers exporters greater access to the Indian market through tariff elimination or reduction on around 85 per cent of goods. Some sectors and products will see the removal of tariffs from day one while other sectors will see tariffs reduced or phased out over time.
Before CEPA, India was applying import duties on goods on what we called the most-favoured nation (MFN) basis, in which with everything was treated on the same basis. Now, however, the private sector can export their goods to India based on this new agreement – which for many products will be zero per cent. This will provide a clear advantage over other exports from other nations.
How can exporters know whether their product is exempt?
There is a series of steps in which exporters and manufacturers will need to take to understand the rules and regulations of the CEPA, all of which can be accessed by a new website section we have now launched and through a handbook we will be circulating. In basic terms, the first step is to define the product and ascertain whether it has preferential treatment in the deal. The second, is to check it satisfies the rules of origin criteria, meaning it qualifies as a UAE-made product.
Once that has been done, businesses can check on the website for the tariff reference, which will outline what rate is currently being paid, what the rate will be in the first year. If it is more than zero per cent and it is not in an excluded category, it will then show the rates applied in year two, year three and so on. Excluded products will continue to pay the benchmark rate.
Can you explain more about rules of origin and how UAE exporters can understand them?
It’s an important part of the CEPA — and was a major focus of our negotiations with our Indian partners. The rules of origin chapters of the deal govern the criteria for which traded goods are eligible for tariff reduction or elimination.
The first step is to refer to the rules of origin chapter and annexes referenced above to find out whether your product qualifies for preferential treatment as the certificate of origin application will change depending on that criterion.
In either case, you have to establish whether your product is an “original” product. There are two broad categories for this. The first is “wholly obtained”, a product that naturally exists in the UAE — fish, for example — or something made from a wholly obtained product — such as milk or honey. The second is when you import foreign material and transform it in a significant way. This can be through changing the classification of the product, adding significant value to it, typically 40 per cent, or putting the material through a specific operation. In steel, for instance, this can be melting and pouring. In oil, it’s refining.
So, it’s important that every exporter understands these rules before applying for a certificate of origin. Once the certificate is issued, it can then be forwarded to a business’s clearing agent or exporting agency.
How about trade in services? Are these handled in the same way?
Our CEPA secures greater market access and fair competition for service providers operating or looking to expand to India. The agreement covers a total of 11 service sectors and more than 100 sub-sectors, including: business services, telecommunication services, construction and related services, educational services, environmental services, financial and insurance services, health-related and social services, tourism and travel-related services, and transport services. Companies seeking to export services to CEPA countries should review the respective Trade in Services Chapter to understand the rules and disciplines. It’s also important to check the schedule of specific commitments for what we call the horizontal rules, such as foreign equity or registration requirements, and then the sector-specific rules, such as limitations on cross-border supply and commercial presence.
Is digital trade covered?
It is. Both sides have worked to establish a modern framework for digital commerce in this CEPA. This covers elements such as data protection and digital consumer rights, digital payments, digital signatures and digital identity, and secure data flows. Importantly, it also enables both sides to revisit these measures to address the inevitable changes in digital trade in the coming months and years.
WHAT IS UAE-INDIA CEPA
The India-UAE Comprehensive Economic Partnership Agreement (CEPA) is the biggest bilateral trade pact between the two major economies.
The agreement, which was activated on May 1, 2022, offers exporters greater access to the Indian market through tariff elimination or reduction on around 85 per cent of goods. Some sectors and products will see the removal of tariffs from day one while other sectors will see tariffs reduced or phased out over time
All of the CEPA details, including the rules outlined above, will be made available from the Ministry of Economy website: www.moec.gov.ae/en/cepa
— muzaffarrizvi@khaleejtimes.com
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